India-UAE FTA text likely to get Cabinet nod soon

Amiti Sen | | Updated on: Dec 27, 2021
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The comprehensive pact may be formalised during PM Modi’s proposed visit to Dubai around January 6

The final text of the proposed India-UAE free trade agreement is likely to be taken up by the Union Cabinet for approval soon as negotiations between the two sides have been successfully concluded, according to a source.

“The Cabinet approval for the India-UAE Comprehensive Economic Partnership Agreement (CEPA) is expected to come in time for Prime Minister Narendra Modi’s visit to Dubai, scheduled around January 6, where the pact is likely to be formalised”, the source told BusinessLine.

Exports from India that could benefit from the CEPA include textiles, gems & jewellery, petroleum products, engineering and machinery products and chemicals. Gains will, however, be limited as import duties on most goods are at 5 per cent in the UAE.

Import duties on most agriculture products, such as meat, fruits & vegetables and tea, are already at zero per cent, so India is unlikely to make substantial gains in the area, the source pointed out. However, alcoholic, carbonated, and sweetened beverages products have a 50 per cent duty, and e-smoking devices and tobacco products attract a 100 per cent customs duty.

“Market access in services, including mutual recognition agreements for various professions, is also an area of primary interest for India,” the source said. The CEPA will also cover other areas including investments and government procurement.

Since India’s import duties, on both industrial and agricultural goods, are much higher, especially for sensitive sectors, it has greater responsibility of protecting its industry against import surges.“New Delhi’s key concern is that the UAE should not be used by third countries to ship their products to India at concessional import duties negotiated under the CEPA. While the Indian industry can face competition from the UAE, the situation can get serious if items from other countries also start getting in. It is, therefore, important to fix strong rules of origin,” the source said.

The UAE was India’s third largest trading partner in 2020-21 with the country exporting goods worth $16.7 billion and importing items valued at $26.6 billion. India's major imports from the UAE include petroleum and petroleum products, precious metals, gems and jewellery, minerals, chemicals and wood products.

UAE has also investments worth $11 billion into India since 2000 and is among the top 10 investors for the country.

The proposed CEPA is also important because of its strategic interest to India since UAE is a top supplier of petroleum to the country and could play a major part in strengthening relations with the entire Gulf region.

India’s goal is to become the ``No. 1 trading partner’’ of the UAE, Commerce & Industry Minister Piyush Goyal said at a recent interaction with the industry. “UAE is a gateway to Gulf Cooperation Council and all of Africa," he said.

The negotiations for the pact, which started in September 23-24 this year, were fast-tracked following an intensive round between officials from both sides earlier this month when demands and offers were finalised in all key areas including rules of origin. //The legal procedures and ratifications to implement the CEPA may take some more time. It is expected to cover a wide range of areas including goods (both industrial and agricultural), services, investments and government procurement.

Published on December 27, 2021

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